Formula Business Restriction – Fredericksburg, TX

In April 2008, the city council of Fredericksburg, Texas (pop: 10,800) voted 3-1 to amend their zoning code to include rules that require standardized (formula) businesses to apply for a conditional use permit to enter the city’s historic downtown district.

The ordinance requires that standardized businesses seeking to open in the historic district (a 3 by 10 block area) apply for a conditional use permit.  The city council and planning commission may approve only those businesses that they determine will not “detract from the uniqueness of, nor materially alter the identity of, the Historical Shopping District” and will not “contribute to the nationwide trend of standardized offerings.”  Other criteria detailed in the ordinance include whether the proposed business will “add diversity to the mix of businesses” and will “complement those businesses already in the Historic Shopping District.”

A business that does not meet this standard may be rejected entirely or required to alter its appearance and operations to better fit the district.  The ordinance also gives the planning commission and city council the authority to request studies (traffic, impact, etc) to substantiate any part of the application.

The ordinance defines a standardized business as any store, restaurant, bank, sales office, hotel, or salon that has standardized features (menus, logos, array of services, signs, etc.) which cause it to be substantially identical to more than 10 other businesses, regardless of ownership or location.

The public discussion that led to this ordinance began in January 2007, when independent business owners voiced concerns about chain stores driving tourists away from the city’s downtown.  A poll conducted by the local tourism office found that 72% of respondents would not return if most downtown businesses were chains.  A strong contingent pushed for an outright ban of all formula business in the district, but city officials thought a better compromise would be a permit process with robust conditions.

“We just want to make sure that downtown maintains the mix that we have and doesn’t get overrun by commercial shops that are available all over,” Dick Estenson, owner of a downtown brewery, explained in a San Antonio Express article.

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Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.